Thirty years ago, I was pumping gas at a Mobil station for minimum wage. Then our government gave me grants and loans for college. When I got into law school, our government gave me more grants and loans. Now I'm fortunate to be a successful lawyer. My kids go to private schools. We live in a large home. I can afford to pay more taxes so others can benefit like I did.

Sure, I worked hard for my money. I had talent. I had drive and ambition. But I also had a government that was there for me along the way, giving me financial aid so I could get a first-rate education. Today, our relatively flat-rate tax structure leaves little money left to help those in need.

For most of the 20th century, the graduated income tax helped keep Americans closer together economically. More recently, tax cuts for the rich, like me, have fostered economic inequality. In the 1950s, our top marginal tax rate was 90 percent. As recently as 1980, our top tax rate was 70 percent. Now our top tax rate is only 35 percent. The IRS' latest data show the greatest economic inequality since the Depression.

Our tax system is dividing our country into haves and have-nots. This is because our tax code now favors wealth over work. My stock dividends are taxed at just a 15 percent rate. So are my capital gains. If I die, my wife and kids will inherit all my money without having to pay any estate tax. And, if I keep living, I will continue to pay just 35 percent tax on my substantial income.

We didn't use to concentrate wealth in so few. Economic mobility has always been one of our cherished ideals. But cutting taxes on rich people like me in the past 30 years is turning economic mobility into an American myth. Since I pumped gas for $2.10 an hour, the richest 10 percent have gained the most. The richest 1 percent have done even better and now make more than 20 percent of all the recorded income.

The 90 percent of Americans left behind could stand to keep more of their earnings. The single mothers. The veterans. The truckers. The waiters and waitresses. The teachers who educate our kids. The cops and firefighters who keep us safe. We are breaking our social contract with all of them.

Our government also has great needs for more money. We need to look after our troops. We need to fund Medicare and Medicaid. We need to better educate all of our children, not just the rich ones. And we need to stop adding to our deficit. I want to help with all of these needs by paying more taxes. I want to help bring us closer to fulfilling America's promise to everybody. "One nation indivisible" means we all have to be closer to each other economically.

We can achieve this goal if I and others like me pay more taxes.

Jim McDermott chairs the litigation department at a downtown Portland law firm.

The Estate Tax Promotes Family and Societal Values

Posted by
McDermott, Jim

Tuesday , October 27, 2015

Jim Mcdermott

In recent years, I have advocated passionately for imposing higher income and estate taxes on the wealthy. In Oregon, our state and federal governments need greater revenue, and we at the top collectively have the money to spare. The same is true for well-off companies. Multiple studies show that higher taxes on the rich do not stymie economic growth.

Just as our elected state and federal leaders have failed sufficiently to tap into this large source of additional revenue, our leaders have likewise failed to pay sufficient attention to the expense side of the budgetary equation. On the state level, PERS is a prime example of leadership failure. For example, a teacher in his or her mid-50s retiring after 30 years of service typically receives a guaranteed annual check for life of approximately $60,000, plus cost-of-living increases each year. That teacher has a life expectancy of approximately 30 years. The present value of this defined benefit future income stream is $1.5 million, using a 3 percent discount rate. And this is just for one teacher's retirement. Does it really make sense to pay a public employee more in retirement than what we paid him or her to actually work for us?

PERS represents a gushing budgetary drain. Teachers, I applaud your public service. I honor your commitment to educating our kids. I don't want you to suffer in retirement. But very few people in the private sector making your income for the past 30 years have saved $1.5 million for retirement. And, importantly, PERS beneficiaries don't have to worry about running out of retirement money. If they live five to 10 years beyond their life expectancies, they'll still get their guaranteed pension, plus a generous COLA, until death.

Applying any rational economic model, PERS is just too rich. The medium- and long-term costs are staggering. PERS benefits -- absent further changes -- will sap current and future necessary public investments. One of the larger public investments we need to make is in public education. But PERS costs are seriously hampering our ability to make that critical investment.

The recently enacted anemic PERS changes don't even reform the unconscionable spiking problems, the money match problems or the 6 percent public employer "pickup" problems. Instead, the state supposedly just "reformed" PERS by, in part, deferring $350 million in public employer rate increases to the future. What our elected leaders have done, so far, is similar to a family paying its current bills by converting its fixed-rate mortgage into an interest-only loan and borrowing from an existing IRA. This is Band-Aid financial planning at its worst. This "solution" will only compound our state's long-term financial problems.

This is not leadership. Instead, all this does is stoke the public perception that government doesn't budget wisely and is an irresponsible steward of taxpayer money.

I and others like me -- should be a prime source of additional tax revenue. But public employees making, or soon to make, more money in retirement than they made while working should give up more of their overly generous PERS benefits.

- Jim McDermott chairs the litigation department of a Portland law firm.